8. Replacement analysis Aa Aa Green Moose Industries is a company that produces iWidgets, among several other products. Suppose that Green Moose Industries considers replacing its old machine used to make iWidgets with a more efficient one, which would cost $1,800 and require $250 annually in operating costs except depreciation. After-tax salvage value of the old machine is $600, while its annual operating costs except depreciation are $1,100. Assume that, regardless of the age of the equipment, Green Moose Industries's sales revenues are fixed at $3,500 and depreciation on the old machine is $600. Assume also that the tax rate is 40% and the project's risk-adjusted cost of capital, r, is the same as weighted average cost of capital (WACC) and equals 10% , and they are constant over four Based on the data, net cash flows (NCFs) before replacement are years Although Green Moose Industries's NCFs before replacement are the same over the 4-year period, its NCFs after replacement vary annually. The following table shows depreciation rates over four years Year 1 Year 2 Year 3 Year 4 Depreciation rates 33.33% 44.45% 14.81% 7.41% Complete the following table and calculate incremental cash flows in each year. Hint: Round your answers to the nearest dollar and remember to enter a minus sign if the calculated value is negative Year O Year 1 Year 2 Year 3 Year 4 New machine cost After-tax salvage value, old machine Sales revenues Operating costs except depreciation Operating income After-tax operating income Net cash flows after replacement (adding back depreciation) Incremental Cash Flows $1,800 $600 $3,500 $250 $3,500 $250 $3,500 $250 $3,500 $250